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FTAs = Destabilization

Fair traders have long maintained that NAFTA-style trade deals promote instability.

The case of Mexico clearly showed this, with massive amounts of post-NAFTA rural displacement leading to sharp increases in immigration and narcotrafficking, leading the country to the brink of failed statehood.

Earlier this month, the thesis was proved again in Peru. In 2007, Peruvian fair-traders warned against signing the FTA, arguing that it would incentivize further rainforest destruction. Sure enough, within months of the deal going into effect, huge parcels of the Amazon were sold off to developers, and indigenous forest-dwellers were locked in a life-or-death battle with the government.

Now, over the weekend, fair trader Manuel Zelaya (president of Honduras) was ousted in the region's first military coup since the Cold War. Opposition to CAFTA ran high in Honduras, but local elites signed the deal anyway. This led to a groundswell of support for a president that kept getting more and more progressive, most recently signing onto the Bolivarian Alternative of the Americas, an alternative to NAFTA-style FTAs. The country's elites wanted to block these changes, so pushed a coup. (More information on how you can take action is available here.)

Looking ahead, as the debate continues in the United States over the Panama FTA, some comments made by that country's peasant leaders are worth considering. He said of the FTA:

In Panama, the poverty rate is nearly 40 percent, and it is even higher for the rural areas (65 percent) and indigenous communities (95 percent). If we experience even a fraction of what happened to Mexico in terms of the flood of subsidized U.S. agricultural products, our rural population will disintegrate and look for any survival option – including immigration to the United States.

This kind of trade agreement will only increase hunger and misery in the indigenous and peasant sectors of Latin America, pushing our countries even faster into the arms of leftist governments, which has already happened in South America proper.

The message is clear: if you want increase in desperation and polarization, push FTAs. If you want preservation of democracy and stability, choose fair trade.

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Fair Trader Al Franken Certified Victor of MN Senate Race

The Minnesota Supreme Court just certified Al Franken as the winner of the long-disputed Senate race in that state.

Franken campaigned on a strong fair-trade platform, as this video shows.

That was not the end of Franken's fair-trade positioning:

  • In response to a Minnesota Fair Trade Coalition questionnaire, Franken committed to oppose the WTO Doha Round and Colombia, Panama and Korea FTAs, support the renegotiation of NAFTA and replacement of Fast Track, and oppose any trade agreement that includes NAFTA-style investor rights, among other commitments. 
  • His campaign website said: “I favor a balanced approach to trade that recognizes the importance of opening up markets for our products but protects our farmers as well as our workers, our consumers, and our values. Frankly, the Bush-Coleman approach gives away too much for too little – CAFTA, for example, sold out Minnesota's entire sugar industry for access to six markets with the combined size of Columbus, Ohio. I will support fair trade agreements, but I won't sell out our farmers in a bad deal like CAFTA.” 
  • He also said: “we should re-examine the economic and trade policies that have contributed to illegal immigration. Working to improve economic conditions in Mexico, which we’ve tried and failed to do with NAFTA, could help reduce the incentive many have to attempt to enter the United States illegally.” 
  • In their first debate, The St. Paul Pioneer Press reported that, “Franken, who often called the sitting senator ‘Norm’ through the debate, said Coleman takes huge contributions from the oil industry, works in lockstep with President Bush and left farmers behind by voting for the Central American Free Trade Agreement in 2005. ‘That was not a good deal,’ Franken said of CAFTA.”

For our complete analysis of the role of fair trade in the 2006 and 2008 elections, when 72 fair-traders displaced anti-fair traders, go to the politics section of our website.

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Unifying the Dems across Caucuses

With Congress in recess this week, we're finally able to take a step back and analyze just how significant last week's TRADE Act roll out was.

What's most impressive is just how diverse the list of TRADE Act cosponsors are. We put together a handy list of cosponsors, and we're all jazzed when we see the 17 members of the Blue Dog Caucus together with 14 members of the New Democrat Caucus and 19 Congressional Black Caucus members. I'd be really interested in seeing a list of bills cosponsored by both Barbara Lee (D-CA) AND Leonard Boswell (D-IA).

And then you have members like freshman Rep. Tom Perriello (D-VA), who won his seat by 727 votes in a district President Obama lost by 2500 votes, connecting the dots between the current economic crisis and 16 years of the NAFTA trade model at the roll out press conference. What Perriello gets, and Democrats must to keep their majority, is that the politics of trade reform play especially well for Democrats in those red or purple districts that Democrats originally lost back in 1994. If I were knocking on doors for a candidate in Virginia, North Carolina or upstate New York, I'd be keeping the TRADE Act's call for a review and possible renegotiation of NAFTA high up on my clipboard.

Blue Virginia gives Rep. Tom Perriello a shout out for his leadership on the issue here.

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Videos from yesterday's TRADE Act presser

We've got statements from six members on video from yesterday's TRADE Act news conference. Here are the goods (all these links go to YouTube):

Also, check out this Reuters story on the Washington Post website, which says:

Trade deals with Panama, Colombia, and South Korea were negotiated by the Bush administration, but must be ratified by Congress before they can go into effect.

The House legislation "sets a clear standard for where House Democrats are on trade," said Bill Holland, a spokesman for Public Citizen, a consumer advocacy group that supports the bill.

"Those three (pending) agreements are built on the NAFTA model, and today's introduction of the Trade Act is a clear rejection of that model and a call for change," he said.

Finally, here are some letters of support for the TRADE Act from prominent organizations. A few samples: AFL-CIO; Change to Win; Sierra Club; Friends of the Earth (all PDF downloads).

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TRADE Act 2009: Double the Original Cosponsors, Double the Fun!


As Todd mentioned, the TRADE Act was reintroduced in the House of Representatives today by sponsor Rep. Mike Michaud (D-Maine). This year's version of the legislation is backed by 106 original cosponsors, including nine committee chairs and 45 subcommittee chairs. The cosponsors come from the full range of Democratic caucuses and from around the country. The full list of cosponsors is available here. The Trade Act - 2009 version - has double the number of original cosponsors as the Trade Act introduced last June, showing that support is rapidly growing for a fair-trade alternative to our current failed NAFTA-WTO model.

At today's press conference, although periodically interrupted by a series of floor votes, a number of members of Congress gave impassioned statements about the need for a new direction on trade. Chairwoman Louise Slaughter (D-N.Y.) and Reps. Michaud, Paul Tonko (D-N.Y.), Betty Sutton (D-Ohio), Tom Perriello (D-Va.), and Rosa DeLauro (D-Conn.) all spoke and took questions. We'll have video clips of some of these statements up by tomorrow.

In the meantime, after the jump, check out our full press release and some additional photos from today's press conference.

Continue reading "TRADE Act 2009: Double the Original Cosponsors, Double the Fun!" »

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Trade Act to be unveiled shortly

The 2009 Trade Reform, Accountability, Development and Employment Act, or TRADE Act, will be unveiled at 2 pm at an event on Capitol Hill.

The bill, sponsored by fair-trade champion Rep. Mike Michaud (D-Maine), has over 100 cosponsors, and represents a positive, forward-looking alternative to the failed NAFTA-WTO unfair trade model. Check out our post on last year's unveiling for a taste of things to come.

Stay tuned!

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Maine Lets Lawmakers Decide

Last Friday, Maine became the fifth state to safeguard democratic decision-making in international trade negotiations. LD 1257, introduced by Rep. Sharon Treat (D-Hallowell), passed unanimously by the legislature, and signed into law by Governor Baldacci on June 12, establishes a sensible process for responding to requests from the United States Trade Representative regarding state commitments to non-tariff provisions of trade pacts like subfederal procurement provisions. In short, since committing to these provisions of trade pacts has the potential to affect state laws, the state government has decided to let the Maine legislature make the call. Legislature

“Trade agreements have major implications for state laws and policy, and can override our environmental, public health and even insurance laws,” said Rep. Treat. “Right now, states have little to no say in the details of trade policy, and often find out about these agreements after the fact. This law will help ensure that the Maine Legislature is ‘in the loop’ and that a Governor cannot bind the state to a treaty’s provisions without specific legislation authorizing that action.”

Sarah Bigney, an organizer for the Maine Fair Trade Campaign which supported LD 1257 says:

"The fact that this bill passed unanimously through both chambers goes to show that this is not a partisan issue. State's rights are very important to Mainers. We at the Maine Fair Trade Campaign feel that legislation our state and country pass, like important environmental and public health laws, must not be subject to challenge in the name of profits. Our coalition of 53 organizations across the state is very proud of the Maine Legislature and Governor Baldacci for continuing to lead the way on fair trade policy."

Maryland, Rhode Island, Hawaii, and Minnesota are the other states that have established legislative approval processes similar to Maine. 

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Obama Administration Blocking Reform at the UN Financial Crisis Summit?

We sent this memo to reporters yesterday:

Is the Obama Administration Working With the EU, Canada to Block Real Reform at This Week’s UN Financial Crisis Summit?

Wealthy Nations Send Only Low-Level Reps; Insist Communiqué Calls for WTO Doha Round Conclusion Even as Doha Agenda Includes More Financial Service Deregulation

This week, government representatives will meet in New York for what was to be an unprecedented, inclusive high-level global debate about the causes of and solutions to the financial crisis. The summit was called to remedy the significant shortcoming of the G-20 summits, which excluded most of the 192 United Nations (UN) member nations, promoted only minimal reforms to the global economic architecture and pushed further financial deregulation by calling for completion of the World Trade Organization (WTO) Doha Round talks.

Instead of the UN summit remedying the problems of the G-20 approach, reports indicate that rich countries have worked behind the scenes to ensure the UN summit does not focus on the role of existing global economic governance structures in causing the crisis nor issue a call for reforms to these institutions and policies. In a candid speech this weekend, the elected president of the UN General Assembly, Nicaraguan priest Miguel D’Escoto noted: “...despite the growing need for major changes, many Member States, particularly those in the North, increasingly resist reforms of the IMF and the World Bank, hoping that things will return to business as usual. And they have also made it very clear that they do not want a serious global conversation to take place at the United Nations.”

Read the full memo after the jump, or download the PDF (with footnotes that are not included here).

Continue reading "Obama Administration Blocking Reform at the UN Financial Crisis Summit?" »

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Public Citizen, others endorse Incorporation Transparency and Law Enforcement Assistance Act

Yesterday, Public Citizen alongside the Center for Corporate Policy, Citizens for Tax Justice, Friends Fiduciary Corporation, Global Financial Integrity, Global Witness, Government Accountability Project, MaryKnoll, New Rules for Global Finance, Oxfam America, and Tax Justice Network USA delivered a letter to leaders of the Senate Committee on Homeland Security and Governmental Affairs (PDF) expressing support for S. 569, the Incorporation Transparency and Law Enforcement Assistance Act. This legislation, as the letter describes,

"...will help law enforcement stop the misuse of U.S. corporations for tax fraud, money laundering, terrorist financing and other illicit financial transactions... [and will] bring the United States in line with international standards of transparency."

At a committee hearing yesterday, the bill's sponsor, Sen. Carl Levin (D-Mich.), referenced this letter in his opening remarks (around the 37 minute mark of the hearing video) and inserted its text into the hearing record.

"There is a long list of endorsers of our legislation, including the Federal Law Enforcement Officers Association, Fraternal Order of Police, National Association of Assistant U.S. Attorneys and more; it's been endorsed by groups combatting financial and corporate abuses including Tax Justice Network, Global Financial Integrity, Citizens for Tax Justice, Public Citizen and more."

Read the full letter here (PDF).

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The WTO Wants You to Light up a Cancer Stick

Over at IELP, Simon Lester alerts us to a potential WTO case that Indonesia might bring against the recent U.S. bill to step up regulation on tobacco. Read the full post for details, but I thought Simon's closing comment was interesting:

I hate to sound defensive here, but I just want to emphasize to trade skeptics out there that this issue does not mean that countries can't regulate tobacco. It just means that they can't insert protectionist components into their tobacco regulation measures. 99.9% of these measures are fine under trade rules.  The main problem area is the part about (possibly) treating foreign products less favorably than domestic ones.

An insider in the tobacco debates tells Eyes on Trade:

In terms of what actually happened:

Everyone recognizes that flavorings are a way to appeal to kids.

Menthol historically in the US has been marketed to African Americans, so there is actually extra good public health reason to ban it.

The failure to ban was not because of so-called protectionist impulse, but political reality: It's too big a market to wipe out and get the bill passed. This is probably a combination of both manufacturer power and worries about protests from African-American smokers.

Of course, that political reality is no WTO defense at all.

An important point not mentioned in this post is that Philip Morris International now owns the third biggest kretek maker. PMI -- now a separate company from Philip Morris/Altria -- has alleged no interest in the US market but they are under no contractual limits, so far as I know. PMI's HQ is in Switzerland, but they remain registered as a NYSE company.

Tobacco and public health groups will be very worked up about this, should a [WTO] challenge emerge.

This observer's comment that "political reality is no WTO defense at all" is what's key here. God willing, over the next few years, we're going to see a lot of consumer and environmental protection laws going into effect. A lot of them will be messy, and a lot of them will be criticized by groups like Public Citizen. But I don't think there's an advocate here among us that doesn't realize that the political process is going to yield imperfect results that are still better than nothing. Maybe it's time for a "political reality" carveout from WTO obligations.

An update from Simon on a speech from Rep. Virginia Foxx (R-N.C.) had the member arguing that the U.S. should cowtow to WTO threats. Will this be the next case of the WTO chilling effect? Stay tuned.

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More potentially good news from Peru

Last week, we mentioned briefly that Peru is suspending two new laws related to the U.S.-Peru FTA aimed at encouraging "investment" (ie resource extraction) in the Peruvian Amazon. OpenLeft's Paul Rosenberg reported in depth on these developments.

As it turns out, this story has legs. Today, the Wall Street Journal reports that Peruvian Prime Minister Yehude Simon "will resign in the near future, amid criticism of his handling of bloody indigenous protests in the Amazon earlier this month in which at least 32 police and Indians were killed... Under Peru's constitution, Mr. Simon's resignation will lead to the resignation of the entire cabinet, opening the door for [Peruvian President Alan] García to push out other ministers tarnished by the conflict, such as Interior Minister Mercedes Cabanillas."

And then there's this:

Mr. García may also now pull back from his unofficial policy of favoring investments with or without the consent of local populations, said political analyst Santiago Pedraglio. The government had approved the decrees in part to bring Peru's laws in line with requirements outlined in its free-trade deal with the U.S.

"García made a bet that there could be these large-scale investments without taking into account the people in those regions," says Mr. Pedraglio. "But he will have to now, and I imagine investors will also want to take those concerns into account now."

The WSJ article makes it sound like García himself is free of blame, but of course he played a key role in getting the U.S.-Peru FTA passed and implemented. And as should be abundantly clear by now, it's the FTA's pro-corporate investment provisions that are a root cause of these upheavals.

EDIT: Courtesy Peruanista, check out this video (Spanish language) of Citizens Trade Campaign's Octavio Ruiz discussing Peru's future under the FTA, outside the Peruvian embassy in Washington DC. (There have been numerous protests outside the embassy in the past week; we'll have photos from one of them shortly.)

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Re-regulating Finance Starts Now

Yesterday, Public Citizen and a wide variety of other consumer and labor groups kicked off the Americans for Financial Reform coalition. Our mission?

For too long, the rules of Wall Street have been written by the bankers themselves.


This year, that has to change.

Americans for Financial Reform is a coalition of nearly 200 national, state and local consumer, employee, investor, community and civil rights organizations that have come together to spearhead a campaign for real reform in our banking and financial system.

We're circulating a petition to restore transparency, oversight, and fairness to the financial marketplace. Take action here!

One of the principles of the coalition is that International institutions, from trade pacts to development banks and others, should provide a regulatory floor, not impose a regulatory ceiling. (You can read our issues brief on that matter here.) Expect to see more from us about how we can reform trade, investment and financial pacts to promote prosperity and security!

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Were YOU Made in America?


Here's one for the PR Spin On Crack files. Courtesy of the AFL-CIO blog, this is too rich not to share:

Over the Memorial Day weekend, J.C. Penney advertised a silkscreen T-shirt bearing the slogan, “American Made.” Yet when Joe Allen, a retired apparel manufacturer in the Dallas area, bought the T-shirt, he found it actually was made in Mexico—”of USA fabric.”

...Here’s what J.C. Penney spokesperson Kelly Sanchez had to say:

You indicate that there was a shirt that depicted the slogan “American Made.” This type of slogan is referring to the actual person wearing the shirt and not to the manufacturing of the merchandise.

Emphasis added. So my question is, does this imply that J.C. Penney is going to wade into the immigration debate?

Anyway, also on the topic of failing to invest in the U.S. economy, if you haven't been following the IMF funding debacle, Mark Weisbrot has a nice primer at the Guardian Unlimited.

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Breaking: Another win in Peru

U.S. fair traders won a temporary victory with Obama's decision to back off on the Panama FTA. Now it looks like our Peruvian allies have won a temporary victory in their country, after pressure from grassroots activists and legislators from the U.S. and Peru. Reports Reuters:

Peru's Congress on Wednesday temporarily suspended two land laws that triggered violent clashes last week between protesters and police in a remote Amazon region, killing 60 people.

The laws, decreed by Peruvian President Alan Garcia under special powers Congress gave him to implement a free-trade pact with the United States, outline a broad plan for how to regulate investment in the Amazon.

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Work for (a) Change, with GTW

Public Citizen's Global Trade Watch division is hiring for several positions, including for a researcher/blogger, media/communications person, and a deferred or outplaced law associate (if you don't know what this is, it's not you)! The most exciting part of this job? You get to work with the glamorous Eyes on Trade posse.

Please circulate to people you know who may be interested. More details are after the jump.

Continue reading "Work for (a) Change, with GTW" »

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NAFTA Bullet Dodged in Flawed Glamis Case; Severe Threats Remain

Luke Eric Peterson broke the news this morning that Glamis Gold Co. lost its NAFTA claim against the United States. Here is our response below, and some background on the case:

For Immediate Release: June 9, 2009                   

U.S. Dodges Bullet on NAFTA Glamis Case: Mining Firm's Claim Had Major Flaws, but Four Foreign Investor Cases against U.S. Totaling Over $6 Billion Still Pending

       WASHINGTON, D.C. -A NAFTA tribunal's dismissal of Glamis Gold Inc.'s challenges against California's mining regulations is not surprising given severe flaws in Glamis' claim and the ruling does nothing to remedy the serious problem of NAFTA providing foreign investors special rights to attack domestic health and environmental laws, Earthjustice, Earthworks, Public Citizen and Sierra Club said today.

       The panel's decision in the Glamis case does not affect the outcome of the four other NAFTA challenges pending against the United States in which foreign investors are demanding more than $6 billion in U.S. taxpayer compensation. The Glamis case attracted considerable attention because it involved a firm claiming to be a Canadian foreign investor under NAFTA in order to file a challenge over a mining claim available only to U.S. residents that it had acquired through its domestic subsidiary. Further, Glamis claimed that California mining regulations had caused an indirect taking of the mining claim's value and thus NAFTA required the firm to be compensated. Yet, in fact, Glamis remained free to sell its valuable mining rights or to operate the mine following California's mining laws.

       "It is no surprise that this long-delayed NAFTA case was dismissed given the major flaws in Glamis' claim. In addition, there would have been serious political ramifications if a foreign corporation had been able to use NAFTA to be awarded millions of our tax dollars because it did not want to comply with non-discriminatory mining regulations that protect public health, the environment and the cultural and religious practices of an Indian tribe," said Lori Wallach, director of Public Citizen's Global Trade Watch division. "Today's dismissal does nothing to fix the underlying problems with U.S. trade agreements' foreign investor rights rules, which are replicated in the leftover Bush trade pacts with Panama, Colombia and Korea the Obama administration inherited."

       "Happily for California's taxpayers and environment, the panel ruled against Glamis' attempts to avoid having to play by the same rules as everyone else," said Margrete Strand Rangnes, director of the Sierra Club's Responsible Trade program. "But the fact that Glamis' claim was even possible, that a foreign company could try to undermine U.S. environmental laws in the name of higher profits, shows why our trade agreements' foreign investor rules must be altered."

Continue reading "NAFTA Bullet Dodged in Flawed Glamis Case; Severe Threats Remain" »

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Oregonians Raise a Ruckus, Say "We're Tired of Hosting Speaking Tours"

Oregon trade activists showed yet again why they are among the MVPs of the fair-trade movement, pressing themselves into Rep. Earl Blumenauer's (D-Ore.) office to demand that he publicly come out against the Panama FTA.

One of my favorite parts of this video come right at the beginning, when organizer Beth Poteet describes a recent speaking tour with Witness for Peace, where speakers from Mexico and elsewhere made the case against NAFTA-style policy on moral, policy and other grounds:

We just had a farmer from Oaxaca come here on a speaking tour. He spoke in Washington, Oregon for two weeks to about 2,000 people, sharing a message of how NAFTA has been devastating for the rural economy in Oaxaca and throughout Mexico...  We're now seeing some of the same things happen in Central America...

Personally, I'm tired of it. I'm tired of hosting people on these speakers tours and taking delegations to Latin America. We're hearing the same thing over and over again, that these policies are further impoverishing people, not only abroad, but also in our own country. And I'm tired of it. And I want Earl Blumenauer, as all of our representative, to take a stand against it. It's ridiculous that he continues to side with corporations, instead of with people. That's not his job.

Can I get an Amen? Brothers and sisters, can you imagine a world without speaking tours, where our representatives do what's right without a fight? Where speakers don't have to catch a cross-country flight in a small dangerous puddle-jumper plane whilst feeling ill, all to be fed vegan chili and "hosted" on the floor of a college dorm room?

In all seriousness, Beth captures very well the feeling of frustration and exhaustion that so many of us experience as we make the indictment over and over again, year in, and year out, and there's still way too many members of Congress who should be with us that aren't. Hats off to the Oregon activists for impressing the heck out of us yet again, and holding their state delegations' feetsies to the fire!

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FTA-Spawned Crisis Continues in Peru

Reports over the weekend show the violence surrounding protests in in Peru is worse than originally thought. According to Australian Broadcasting Corporation (ABC) News:Peru AIDESEP

Up to 100 Amazon natives have been killed after Friday's military crackdown on protesters in Peru and the situation is expected to worsen, says a Canadian Indigenous rights activist.

Twenty-two-year-old Ben Powless is working alongside Peru's national organisation of Amazon Indigenous people, AIDESEP, and fears more lives will be lost, with the government now labeling protesters as "terrorists"...

AIDESEP, as some may recall, was outspoken in their principled opposition to the U.S.-Peru FTA during the U.S. congressional debate in 2007. Their letter to Congress correctly predicts the FTA would pave the way for policies that would harm communities and the environment:

The Wall Street Journal is reporting on the unrest generated by García's investment-at-all-cost trade policies:

The president is facing his worst crisis since 2006, when he took office for a second term. The protesters are demanding that the government backtrack on decrees that the indigenous groups say would weaken their traditional communal land system by breaking up land into parcels of private property. The García government has been moving aggressively to grant concessions for oil and natural gas exploration in the Amazon.

Analysts say giving in to protester demands would make Mr. García seem weak and cast a cloud over a recently signed free-trade agreement with the U.S. Following the pact, the government enacted laws that opened up indigenous lands to development, changes that the indigenous groups oppose.

ABC News' reports from ground zero suggest that the government's PR machine is working overtime to blame the victims for being massacred:

"What we've been hearing from some of the communities is that a lot of the death tolls and the number of people hurt or injured are dramatically different from the Government figures, which put it as low as three to nine Indigenous people who have been killed," he said.

"But we have heard from some representatives on the ground that there may be as many as 100 people murdered.

"There was an active attempt by the Government here to portray it as a massacre of policemen who went into an area and were killed on their job, when in reality, native participants were sitting in blockades early in the morning [on Friday] when the police attacked."

Mr Powless says the Government is controlling information on the unfolding events.

"There is a lack of information about what's going on," he said.

(HT to BoRev.Net.)

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A Terrifying Way to Start the Weekend

Report are in that Peruvian police have massacred at least 20 indigenous people who have been protesting FTA-related policies that give concessions to corporations without consent or consultation of indigenous communities.Peru

According to Reuters:

At least 20 people died and 50 were injured Friday in clashes between Peruvian police and Amazon tribes opposed to foreign companies opening oil wells and mines in the rainforest.

Indigenous leaders accused police of shooting at hundreds of protesters from helicopters to end a road block on a remote jungle highway 870 miles from Lima, the capital.

Police said the protesters fired first, but the tribesmen denied having guns and said they only bore their traditional spears.

Tribal leaders said a dozen protesters were killed, while the interior ministry said eight officers died in protests over the government's push to open up Peru to foreign investment. It was the first round of severe violence since demonstrations started in April.

"There are 12 dead ... from bullets shot from helicopters," indigenous leader Alberto Pizango told reporters in Lima.

Check back soon for more details on the mobilizations and more analysis on how the U.S.- Peru FTA started this horrifying chain of events into motion. Let's keep the families, and the causes for which their loved ones died, in our thoughts this weekend.

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Wanting a Cookie

One thing that you get used to after living in Washington for a while are the tight controls on messaging and information.

Corporate types didn't get the memo.

First there was this article from the NYT over the weekend:

The Obama administration has riled corporate America by cracking down on secretive offshore tax havens. But now a big onshore refuge — Delaware — is drawing scrutiny, too...

Defenders of the arrangement — corporate executives, tax lawyers and, unsurprisingly, Delaware officials — rebuff such criticism. Mailbox subsidiaries like the ones along North Orange Street do nothing to minimize companies’ federal tax bills, they say. Corporations must still pay Uncle Sam. Moreover, these people say, many companies are drawn to Delaware for its business-friendly laws and courts, not to save on taxes.

That is certainly the view at 1209 North Orange Street, a nondescript low-slung building at the corner of West 13th Street. This address serves as a tax minimizer for dozens of brand-name companies, among them Dillard’s, the department store chain based in Little Rock, Ark., and Kentucky Fried Chicken, which is part of Yum Brands of Louisville, Ky. All of them, and nearly two-thirds of the Fortune 500, have tax-exempt subsidiaries at this address to reduce their state tax bills.

I love this: they openly admit that Delaware helps corporations avoid state tax bills "but they still have to pay their federal bill"! As the comedian Chris Rock might say, "What do you want, a cookie?! You're not supposed to dodge your federal taxes!"

And their line about Delaware having other charming features besides the massive tax-dodging opportunities is rich too, and recalls some of what we detailed in our report on Panama's tax haven practices. (Check out the appendix, where we show Panamanian officials bragging that tax evasion isn't the only reason corporations set up shop there.)

Speaking of Panama, "La Estrella," one of Panama's leading papers, has been running a series on the country's tax-haven practices. Here are some of the juicy translated tidbits from the source:

"We are not a tax haven," says Moises Cohen, president of the Panamanian Banking Association says in his offices... In the street, without anger, more out of resignation, the cabdriver Gilberto Francisco Ortega declares, "He who has money can come to Panama and do with it as he will."

The dominant system in Panama grants significant benefits to the corporations established here. All you need to create one is an agent on the ground, generally from one of the large law firms. But these vehicles are a dead letter without the other element of the system: the banking policy, constituted in 1970 that gives, among other benefits, anonymous numbered accounts...

For the lawyer Sidney Sitton, specialist in the creation of corporations, this creates the ideal system for criminals... "Despite the dozens of public and private corruption scandals Panama has witnessed over the years, no one has ever investigated even a single bank, nor have they ever ordered the lifting of bank secrecy," says Sitton...

Moises Cohen views the situation radically differently from Sitton: he is convinced that what has allowed his country to become a financial center is the creativity to attract investment to the country. "If they take that away, Panama is done with. We have a strategic location and a tax system with obvious benefits, but that's it," he says...

[The national banking regulator] draws its budget from fees it charges the banks it supervises... and the laws that regulate banking activities are made and implemented by this regulator and do not go through the legislative branch...

[The Panamanian banking associations] have faith that, in the end, the international community will understand that, just as Panama is a transit hub for the region, the veil of impunity that appears to favor illicit businesses also generates income for other countries.

Yeah, l'm sure Citigroup and AIG are getting a lot of income from Panama's lax policies - and, news flash - that's why all this hay is being made. Here's some other juice:

  • This Cohen fellow seems like a real charmer. In this extended interview, he has such brilliant quips (that recall the Delaware apologetics from above) as: [when trying to explain why a Colombian criminal was able to launder money in Panama] "If people have a legitimate front operation, it's much harder to notice that they may have illicit operations [behind this]." Or, when asked why Panama doesn't charge taxes on multinationals (despite having some of the highest child malnutrition rates in the region]: "Panama doesn't need those taxes... Our economy is very different from others. It would be like telling China they should pay their workers more. Everyone acts in accord with their own economic situation." Yeah, no one would be so crazy as to insist that China close its sweatshops, and certainly not workers... oh, wait.
  • Like we hear of a lot in this country (like from Bill Clinton) whenever there is a corporate crisis, it is blamed (like by this Panamanian official) on a few bad apples. The official can't even answer whether any banks have ever been investigated in Panama. And this article profiles some of the very bad apples - and there have been many. Like the Colombian Nelson Urrego Cardenas, "who is known as the man who made cocaine fall from the sky, and who created 17 foundations that allowed me to even buy an island."
  • This article reports that from May 2008 to May 2009 alone, 13,729 new corporations were registered in Panama, and that, on average, 100 are registered every day.

So, in short, the Panamanian banking sector and government - and let's not forget to mention the bailed out banks and drug dealers that enable the system to function - wants a cookie. But they certainly don't want to regulate.

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Meet the New USTR Website, Same as the Old USTR Website

President Obama's promises during the campaign to shift our trade policies got the base psyched. Yet in the first five months of the administration, the most oft-touted shift in the USTR's workplan (working "rigorously" to pass a Bush FTA doesn't count as a shift, and thankfully appears to be put off for the moment) has been the upgrade to a new website.

We've taken a look at the website, which is purtier and more consistent with other Obama campaign and admin webpages, and here are some things we noticed:

  • Up until yesterday, this link had Panama, Colombia, Korea as agreements in force. This was corrected this morning.
  • A lot of the specific trade agreement pages seem to have lost a lot of their material. For instance, look at this cached page on the Panama FTA, which includes advisory committee reports, and then compare with the new page. The old link that would have gone to the advisory pages doesn't work.
  • The Fast Track / Trade Promotion Authority page seems to be removed. (Maybe I'm wrong, but I couldn't find it.) If USTR is looking for content, we've got a book for them to post - The Rise and Fall of Fast Track Trade Authority!

We're going to be migrating to a new website in the coming months, and the years of planning for it already has me nervous. So, some bumps in the road seem inevitable. The thing that is most concerning about the USTR's new website is the lack of meaningful reference to Obama's trade commitments on the campaign - which would seem like the biggest update needed, with some of the full-throated advocacy of bad trade deals tamped down or removed.

So, here's my question for "Ask the Ambassador" (a new "interactive" feature for the website): When will the Bush talking points on trade come down, and the Obama talking points on trade go up? (Some illustrative examples suggested after the jump:)

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Will GM Bailout Trigger a WTO Case?

That's what the American Enterprise Institute seems to think in a new policy brief:

GM had recently informed Congress that it planned to produce roughly 50,000 subcompacts per year in China to sell in the U.S market in the near future. However, on Thursday, UAW President Ron Gettelfinger said that GM had agreed not to import the cars from China and to produce them in the United States instead as part of its deal with the UAW. This change opens up an enormous set of problems for the United States that will stretch well beyond the automotive sector. The United States has commitments under the World Trade Organization for its tariffs on cars; it's supposed to avoid quantitative restrictions altogether. This latest policy switch looks very much like a government-mandated reduction in auto imports from China...

Nor will GM be the only automaker affected. The principle criticism levied by opponents of the Korea-United States Free Trade Agreement has been that South Korea maintains non-tariff barriers that block imports of U.S. cars. Will the United States still make these arguments while it blatantly uses its financial leverage to block foreign auto exports into the United States?

The Wall Street Journal cited some factors that might tamp down this criticism:

The Canadian government is taking a stake in GM, which could give the restructuring a sense of multilateralism.

Some other governments may balk at challenging the U.S. because they also support domestic auto makers. The German state of Lower Saxony holds just over 20% of Volkswagen AG. The German government and the European Commission have fought for years over a German law that essentially allows Lower Saxony to block VW's major decisions.

...And notes some other potential WTO conflicts of the GM move:

U.S. support for GM has both trade and investment implications. On the trade front, the issues include whether U.S. support amounts to unfair subsidies and whether, as a government-owned entity, GM is bound by international procurement rules that limit the U.S. government from discriminating against foreign suppliers.

When it comes to investment, GM's moves overseas could face tougher scrutiny. The U.S. often closely examines investment by state-owned companies to make sure the firms are acting in a commercial rather than political fashion. That level of scrutiny might now be applied to GM overseas.

Once again, I gotta point out the double standard here. There was not a lot of hooting and hollering going on when AIG and Citi became government-owned entities, and there is certainly a case that could be made that these moves ran afoul of the spirit if not letter of the U.S. WTO commitments on financial services. To paraphrase Leo Gerard, we'll call your bailout WTO-illegal if it benefits those that shower after work, but not if it benefits those that shower before work.

(HT to Simon Lester.)

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Clinton's Real Policy for an Unreal World

The Sunday NYT Magazine had an extended interview with Bill Clinton that shed some light on his views on deregulation:

In almost clinical form, as if back at Oxford as a Rhodes scholar, he broke down the case against him into three allegations: first, that he used the Community Reinvestment Act to force small banks into making loans to low-income depositors who were too risky. Second, that he signed the deregulatory Gramm-Leach-Bliley Act in 1999, repealing part of the Depression-era Glass-Steagall Act that prohibited commercial banks from engaging in the investment business. And third, that he failed to regulate the complex financial instruments known as derivatives.

The first complaint Clinton rejects as “just a totally off-the-wall crazy argument” made by the “right wing,” noting that community banks have not had major problems. The second he gives some credence to, although he blames Bush for, in his view, neutering the Securities and Exchange Commission. “Letting banks take investment positions I don’t think had much to do with this meltdown,” he said. “And the more diversified institutions in general were better able to handle what happened. And again, if I had known that the S.E.C. would have taken a rain check, would I have done it? Probably not. But I wouldn’t have done anything. In other words, I would have tried to reverse everything if I had known we were going to have eight years where we would not have an S.E.C. for most of the time.”

Clinton argued that the Gramm-Leach-Bliley Act set up a framework for overseeing the industry. “So I don’t think that’s such a good criticism,” he said. “I think, actually, if you want to make a criticism on that, it would be an indirect one * you could say that the signing of that legislation sped up what was happening anyway and maybe led some of these institutions to be bigger than they otherwise would have been and the very bigness of some of these groups caused some of this problem because the bigger something is and the newer it is, the harder it is to manage. And I do think there were some serious management problems which might not have occurred.”

Then there are the derivatives. There, Clinton pleads guilty. Alan Greenspan, the Federal Reserve chairman, opposed regulation of derivatives as they came to the fore in the 1990s, and Clinton agreed. “They argued that nobody’s going to buy these derivatives, we’ll do it without transparency, they’ll get the information they need,” he recalled. “And it turned out to be just wrong; it just wasn’t true.” He said others share blame, including credit-rating agencies that underestimated the risk. But he accepts responsibility as well. “I very much wish now that I had demanded that we put derivatives under the jurisdiction of the Securities and Exchange Commission and that transparency rules had been observed and that we had done that. That I think is a legitimate criticism of what we didn’t do.” He added: “If you ask me to write the indictment, I’d say: ‘I wish Bill Clinton had said more about derivatives. The Republicans probably would have stopped him from doing it, but at least he should have sounded the alarm bell.’ ”

Clinton's comments on Gramm-Leach-Bliley and derivatives non-regulation illustrate almost perfectly the flaws in (even smart) neoliberals' logic. First, construct a coherent policy approach that only makes sense if you ignore political economy and political uncertainty (i.e. "de/non regulation would have worked, if only the relevant agencies had done their job like I hoped they would, rather than how industry wants them to function," or "it all would have worked if someone just like me were elected president"). Second, the outcome that someone with even a passing understanding of power and regulatory capture would predict, in fact happens. Third, avoid blame by claiming good intentions.

Are we doomed to repeat this history?

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